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Bloomberg West

News/Business. The personalities, companies and trends that are transforming the global economy.

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Us 11, Jon Erlichman 8, San Jose 7, John Donahoe 6, Emily Chang 5, U.s. 5, China 4, New York 4, Cory Johnson 3, David Marcus 3, California 3, Braintree 3, Paypal 2, San Francisco 2, L.a. 2, Australia 2, Marcus Runs Paypal 1, Sheryl Sandberg 1, Cory 1, Lakers 1,
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  Bloomberg    Bloomberg West    News/Business. The personalities, companies and  
   trends that are transforming the global economy.  

    December 8, 2013
    4:00 - 5:01am EST  

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>> live from ebay headquarters, in san jose, california, welcome to a special edition of "bloomberg west." inside ebay. it started as an auction site, but it has become much more. a massive online marketplace, a major player in online payments through paypal. along the way, the company has transformed from it scrappy upstart to a silicon valley leader, bringing in billions annually. today, we are at the center of it all, inside ebay. welcome to ebay headquarters in san jose, california. this is a special edition of
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"bloomberg west." i'm emily chang. i'm on set with cory johnson. jon erlichman is inside. we will cover it all, from how they have gone from an auction house to a juggernaut. we will talk about their new glass and we will talk about their service. amazon may have drones, but ebay can bring you something in one hour. >> this is something that is interesting. people think ebay is one thing, but it is something very different. i do not think they understand how different this business is. >> it is really cold and i forgot my gloves. i'm getting some gloves delivered to us. >> it is 39 degrees in san jose. >> let's go inside to jon erlichman. what is that all about? >> it is a really fun place, frankly. i feel like i am back at the mall as a teenager. they have a guitar shop. i do not play guitar like cory
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johnson. you have got a place like where you would do your shopping. it is creative. there is this whole changing retail space where you can now use paypal or even your phone or tablet. there is a clothing store right here and we're going to go into an in-depth look at how it transforms itself to get ready for the future. >> alright. we will have much more on the business throughout the day. first, i want to go through ebay by the numbers. how much the company has grown. here is a look. ebay, the global e-commerce and payments company, with more than 31,000 employees in 33 countries around the world. they are driving three different businesses. there is the online marketplace,
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where 120 million active users buy, sell, or bid on 500 million items. a flatscreen tv is sold every six minutes. a pair of sunglasses is sold every 18 seconds. globally, clothing, shoes, and accessories are sold on mobile devices. then, there is paypal. people send or receive money. 729 million times last quarter. that is more than the populations of the u.s., australia, and others combined. payment ranges from the lira to the yen. ebay enterprise -- use technology to make payments for the world's biggest brands. all of it adds up to more than $14 billion in revenue for ebay last year. >> for more on the booming business, i am joined by the man
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who is responsible for turning them into a global e-commerce platform and a leader in global payments. john donahoe is the ceo of ebay. under his leadership, they have grown to over $15 billion today. congratulations on that. this is a big time of year for you. >> we're happy to have you here. happy to host you. >> let's talk about thanksgiving. how did it go for ebay? >> it was a very strong week. it has never been a better time to be a consumer. technology is changing how we are able to shop. it is no longer just about black friday. it is the cyber five. it started on thanksgiving day. people shop on their couch. they start shopping on their smartphone or tablet or laptop. that continues throughout the holiday weekend. for that five day period, we saw
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at all of our properties -- a 96% increase in mobile commerce volume. >> i got 50% of my shopping done. are you done? >> i am not quite done. >> you have been busy preparing for us. going into this holiday, you were a little nervous. you said you had angst about the commerce market. how do you feel now? do you feel a bit more optimistic? >> we're cautiously optimistic. i cannot comment on the quarter. we did not have a federal budget, we had a shutdown. as things come into this quarter, we hope that consumers see that there are great deals and opportunities out there. you can get great gifts for your loved ones. we are trying to make been as easy as possible for consumers. >> it was the biggest online shopping day ever. on cyber monday.
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we were up 20% or so. growth is still slowing down. one of your big strategies is connecting online and off-line. let's talk about connective glass. this is something cool they were doing. you tested it in new york. now you're doing it in san francisco. >> like you said, we used to think in terms of shopping digitally or shopping in a store. mobile technology is enabling the line to blur. you can have a seamless experience that has technology involved, but you can have choice around how you receive the item. we started with kate spade saturday in new york. we put a touchscreen on the storefront. if people walked by, they could shop. they can have it delivered to them with ebay now. that extended to the westfield mall here in the bay area. we have these gigantic touchscreens.
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consumers walking by can engage in a large touch green experience. they can see what they want and have it delivered to them. here is a great example. sony has a store in the mall. they have a touchscreen at another point in the mall. they can shop and then go over to the store to pick up and buy it or they can have it delivered to them later on at home. >> you have said this is not an experiment. you said this is going to scale. how fast do you plan to scale this? >> we approach innovation. we're good at consumer innovation and creating new experiences. just as with ebay now, we have the ability to buy something from a number of retailers and have it delivered to you in the moment. you got some gloves today. >> i am waiting for them. >> you wanted them within an hour. you wanted them today. we rolled it out and now we have it in five cities. it will go to 25 next year.
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with touchscreen, we started in one or two regions and we will slowly roll it out. >> what about the perception problem? a lot of people feel like ebay is an auction. you are much more than that, but that is still what they think. >> 80% of our items are fixed price. you see more and more people coming to ebay. our new active user growth has been accelerating all year long. more consumers are coming to ebay. they like what they see and they are telling their friends. that will take time to change, but the real experience is a great one and we see consumers responding. >> is the goal to beat amazon? different?g >> we're very different. our focus is on enabling commerce. >> should we assume that anything we want will be available on ebay? >> yes. anything you want. we are partnering with retailers all around the world. we do not compete with them. you can go on ebay and can get
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things from sellers in the united states, things from sellers all over the world. you can get things from best buy, who lists on ebay. >> what can i get on ebay that i could not get on amazon? >> you can get goods from all over the world. you could get goods -- 25% of our transactions are across borders. you can reach consumers all over the world. same thing is true from outside. >> what about some of the other competition? twitter, pinterest -- they have a lot of traffic. do you think of them as competition or do you think of them as referrals? >> not at all. there has never been a better time to be a consumer. technology is changing the options that consumers have and how they can shop. and there are choices. our focus is on commerce. what we're good at is connecting a buyer and seller to do a transaction safely and reliably. that is our peace of the pie and it is a growing piece of the pie. it is growing to a $10 trillion market.
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we think there's plenty of opportunity for us to be successful and others as well. >> we're going to talk more about payment after this break. the ceo of ebay -- we will hear more about him and a few moments. amazon working on delivery by drone, but ebay can already get you your packages in just one hour. that is something that amazon does not offer. that is next on "bloomberg west." ♪
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>> welcome back. we are inside ebay. we are broadcasting live from ebay's headquarters in san jose. i am emily chang. in the world of same-day delivery, time is money. ebay has an advantage over its competition. they promise same-day delivery in one hour. that is something amazon and google do not offer. we will tag along with a courier a bit later in the show. i want to talk to john donahoe, the ceo of ebay. i am waiting for my gloves. my valet was very polite and she told me her progress. i know that she is en route and she has found my gloves. let's talk about ebay right now. can you give me any numbers? >> we're not publishing any numbers. but we have done is we have partnered with retailers. when you have a situation and
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you want something, like today you do not want to wait until this afternoon to pick them up. you want them now. as you saw, you go on ebay and you order the gloves. the courier will have them within an hour. >> why not tell us more about how it is working? when i downloaded the app, there were only a few reviews. why not? >> we are building the consumer experience. when you build a new experience, you have to get it right. the consumers who are using it like it a lot. it is evidence that we think it is successful. it has expanded from one market to three, then three to five. we just bought another company that will help us expand across the u.s. >> amazon made a lot of headlines talking about delivery by drone. they are working on that. are you going to show me one? an octocopter? >> we're not working on long- term fantasies. we're working on things that will change the experience today.
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>> you think it is a long-term fantasy? >> we will see. >> other companies are also experimenting with delivery. do you think that -- how do you have an edge on that? >> we have 130 million active consumers that come to ebay intending to shop. we have paypal, which makes payment easy and safe. we start with an enormous advantage of an ecosystem and a willingness to partner with retailers. not compete. there will be a lot of people trying different innovations. our focus is on delivering a great experience to consumers, both here in the u.s. and around the world. >> speaking of drones and google's moon shots, do you think that is important? should you have that mentality to work on or think about far- reaching ideas? >> i think bold innovation is important. our focus is on commerce.
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the notion of a touchscreen storefront widow -- i think that that is a bold innovation. i would call that a bold innovation. five years ago, what we were doing and mobile was considered bold. today, we will do $20 billion in mobile payments volume. by having those moon shots, they can grow to be important. >> paypal is now 42% of the revenue that you bring in? when does it become the majority? >> it is only a couple years out. what is great about paypal is that it serves the entire market. what it is doing is making payments safe and easy. we have always done that online. we are the clear leader in online payments. we're now the clear leader in mobile payments. the reality is that people like to shop. no one wants to pay. paypal is making it easy to shop and make the payment just a frictionless experience.
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>> braintree -- you also made a big acquisition. what is the strategy for next year going to be? small acquisitions or bigger that? >> this is a great example. braintree initiall powered uber. you think about buying. they are sharing mobile business models. we will continue to grow in those. we bring the same principles to the off-line world. beacon will allow -- i walked in with my mobile phone. i do not carry a wallet anymore. it recognizes that i walked into the starbucks. when i got the front of the line, they have my name and picture on the cash register and said, would you like the usual? payments was out of the
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equation. when i bought it, she pressed click and i got a text on my phone. >> we will talk with david marcus, the president of paypal later. alibaba just made a huge sales on a single day in china. how do you get in on that action? >> we have an export business in china. we enable sellers to reach consumers all over the world. this year, we will do $6 billion of volume. we can reach consumers all over the world. we have a strong presence in china. it is a cross-border presence. we will continue to look at that. it is the early days in china. >> i want to ask you about leaning in. sheryl sandberg wrote about you. you have been vocal about how you and your wife have balanced work and family. you have done a lot to try to elevate women here at ebay. any advice for working dads on how they can help women?
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>> in my case, my marriage is a partnership. you could argue that my wife is my boss. we worked hard to balance dual careers and raise a family. for me, this issue is one of competing and winning. if we are going to be successful, we have to have the best people. by definition, half of the people in the world are women. we have to have the best women and men to have a diverse team to lead to the best possible decisions. i think it is a matter of good business and that extends back to the family. it is also a matter of being a good husband. >> that is good to hear. john donahoe, the ceo of ebay, thank you so much for joining us and thank you for having us. when top tech companies try to attract new talent, free perks are often a way to persuade potential workers. the culture at ebay may have
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some asking where all that free stuff is. jon erlichman has been checking this place out. let's take a look. >> among the many interesting things you will find, pez dispensers. the founder's wife was a pez dispenser collector. that played a role in the creation of the company. i am partial to chewbacca. ♪
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>> welcome back. we are inside ebay. i am emily chang. we're with jon erlichman. guess what? we have good news. my gloves have arrived. my fingers can be warm. thank you for keeping me so well updated. they look good. this is what i got. aren't they cute? in one hour, that is pretty good. it is really great to meet you. thank you. i am excited. >> ebay and john donahoe said this -- they are exploring new areas. they need people to make this happen. we wanted to find out about the culture of this place. what goes into the hiring process? what kind of perks do they have
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and is that important? here is more on that story. from the free gourmet meals at facebook to the ping-pong tables at google, silicon valley is known for offering perks. ebay takes a different approach. >> we have a variety of perks, but that is not the way that we ask people to join our company. >> there is a free gym and shuttle service from san francisco to san jose, but employees pay for food and massages. >> the perk is working for our company. people come and they believe in our purpose. >> that purpose, to enable global commerce by 2015. ebay is adding to its army of technology to customer support staff. already more than 31,000 strong. new hires come from an intern program. there were 800 interns this year. they may not care so much about the freebies.
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>> they care about the impact. they care about the impact that the company makes around the world. >> and by recruiting from 300 schools globally, they also get a feel for how the next generation will use the brand. >> when you ask people what they think of when you say ebay, what do they often say? >> what is interesting is that ebay has changed so much. not everyone realizes that. sometimes they think we're an auction company. >> they are hiring 500 new grads this year. the business is growing faster. >> we are a technology company that works off of a platform. the intention is to be able to grow the business without having to grow the number of employees at the same rate. >> there is a little bit of insight into how it all works behind the scenes. >> good to hear. markets are coming up and we will be with him in the new gloves.
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more next. ♪
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>> welcome back. we are inside ebay and we are live. we are in san jose. right now, we are inside the commerce and innovation showcase. jon erlichman is here to tell us what it is all about.
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>> the shopping showcase. they build these elaborate sets in hollywood to try to re-create what happens in real life. ebay is doing the same thing to test out their technology. they need to explain how this whole world of commerce is changing. here is more on that story. this looks like a shopping mall. >> this is where the honey mustard is. >> it is not a store at all. it is a fake storefront staffed by actors to demonstrate the future of shopping. >> this is our technology playground. it gives us a chance to showcase what is on the market. >> he is the chief product officer. it is his job to push paypal into brick and mortar retail. >> you look at what e-commerce were able to do for online shoppers. they made a custom storefront. none of that existed today. >> that means that everything from replacing cash registers to figuring out how to make shoppers comfortable.
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they are also partnering with big brands. >> this is 10x10 interactive glass. we turn a storefront into an interactive store. you walk up, you touch the glass, you select the product. put that in your mobile phone. it is really easy. >> last quarter, paypal moved $600,000 every second. the revenue was $12.6 billion. >> we have moved money from consumers to merchants. we take a small transaction fee. >> the mobile payments crowded the field. companies compete for the action.
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>> we have over 140 million active consumers who use the paypal wallet to shop. that is a meaningful advantage. we have a relationship with the consumer that goes beyond just sixteen numbers. >> for a place where there is technically no shopping, it is pretty busy here. there are a couple of partners per day. >> paypal maybe the best acquisition that they ever made. i want to head out to cory johnson, who is standing by with the paypal president, david marcus. >> this paypal business is fascinating. it is growing like a weed. the building that we are in was once mostly ebay. about 10 years ago -- but no more. david marcus is the president of paypal. how many employees are paypal versus ebay? >> there are two campuses. this is the paypal campus. the other is the ebay marketplace. >> how many people work for paypal? >> about 13,000.
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>> it is growing on a revenue basis. strongly.ing what is it that you think has changed about paypal? when ebay acquired paypal, it was losing hundreds of millions of dollars per year. it looked as a competitive purchase. now, as a stand-alone business, it is doing quite well and growing at double digits. >> e-commerce is growing. more people are buying on mobile. paying on mobile. during the shopping season, this year, both black friday and cyber monday -- over 90% more consumers used paypal to buy things than last year. >> those were numbers that i could not believe. 91% more sales on thanksgiving. 99% more on black friday. that is incredible growth. why is that happening now? what are you learning about this year's shopping? >> people do not want to be in busy stores.
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and wait in line. they prefer to buy online and on mobile. especially mobile. it is growing like crazy. >> because your growth is so great, can you see the results of what is going on? or is your growth just too big to see? >> we can see it. in europe this year, we saw that the economy was slowing down. we had to compensate. the team really fights when those things happen to try to compensate for the macro. we try to compensate by being more aggressive and getting more merchants and doing more promotions. we are their share of checkout volume. when we have macro events, the team tries to compensate. >> in the u.s., your growth is hard to see at a macro level. what are you seeing on the economic environment? >> this quarter was slow to start. if you look at the holiday
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shopping season, it was pushed late. other than that, things are looking better and better. >> you have done so many acquisitions. talk to me about beacon. we were just talking about this. how do you describe it? >> we want to change how people shop. people love shopping. they hate paying. >> is that because they are cheap? >> everybody is like that. we want to remove the friction and make a completely invisible to pay. with beacon, we did that. you can go into a coffee shop, like you did, and you just walk in. your phone vibrates, so you know you are checked in. your photo appears on the point- of-sale system and you pay completely hands free. >> you do not have to go to another cash register? >> we have point-of-sale systems that check in.
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it enables any retail store or coffee shop or restaurant to enable that. >> so, you have these 30 systems. how many point-of-sale locations are you in? >> in the u.s., we have over 100,000 locations. i do not want to estimate. >> you can if you want. >> no, i cannot. >> it is a full disclosure interview. >> with locations in australia, it is tens of thousands of locations already. you can pay at the table. you do not have to wait for your waiter. >> are there still innovations to be done? why should you pay online? you can make the purchase in the aisle and leave. are you looking at those innovations still or are you there already? >> we're there already.
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we have to scale. we're not in applications and that is what it is going to be about. scaling. >> i was talking to people about talking to you and one of the things that i heard back was that there did not seem to be a great consumer awareness. are you going to launch a consumer facing marketing campaign for paypal? >> yes. >> when? >> in 2014. we needed enough experiences out there. this was the year where we reinvented all of our products. we have a lot of new products and new experiences that we need to push out. 2014 will be the year where we invest and show consumers. >> you just acquired a company called braintree. what did they have that you thought you could not build in time? >> we need to be the payment's os.
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any disruptor that wants to build something completely new that involves payment like uber, they need to be on top of paypal. >> you use braintree to process payments. >> 100% of the payments now go to paypal. >> growth rates -- as good as it has been, growth has been slowing down. down 18% year-over-year. does growth need to re- accelerate to hit the targets in 2015? >> it was 20%. yes. we think that we still have a lot of growth ahead. mobile is growing fast. we're going to start seeing the benefits of all of our efforts. not in 2014, but in 2015, and 2016. we can reaccelerate the
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revenues. >> reacceleration of growth is interesting. david marcus runs paypal. thank you very much and interesting stuff. up next, we will look at another part of this company. the ticket site is called stub hub. they're using big data to improve the fan experience. that is next on this special edition of "bloomberg west." ♪
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>> when employees are not boosting commerce, they are encouraged to get physical activity. >> wow. that was pretty good. >> did he call back board on that? >> he could play with the lakers in l.a. >> he talked to kobe in l.a. >> we are back with a special edition of "bloomberg west." in ebay headquarters. from the super bowl to broadway, users flock to ebay's stub hub to buy and sell tickets. one way that stub hub is trying to make things better is by collecting and analyzing user data. cory johnson will explain. >> this ticket business was ripe for innovation.
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ebay made an aggressive move by buying this. the business has grown into something. check this out. scalpers rarely left sports fans stub hub is trying to change the reaction to result tickets. -- re-sold tickets. >> we're not just about selling tickets. it is about the fan experience. innovation is used across the business. >> the plan is simple. they take 25% off the top of ticket sales and the rest goes to the seller. they are after a lot more. ebay paid $310 million for the business. back then, it sold 10 tickets per minute. now, it sells one ticket every second. >> technology was the enabler for this to happen. >> ebay has grown the business with interactive seat maps and mobile ticketing and ways to split the bill with friends.
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stub hub is a risk for ebay. the business had much worse margins. ebay's gross margins have fallen from 77% to 69% since acquisition. paypal has furthered that trend. every incremental dollar compresses ebay's overall margins. milking big data could be the key to improving. >> this is a new science. we're trying to step up and understand that. >> raji arasu is the chief technology officer. >> we know the buyers' buying patterns already. we're taking it to the next level by understanding the click rate. what they might intend to do. it is not about selling one ticket per second. >> interesting stuff. it has dramatically changed the ticket business. re-sellers, scalpers. >> we all know about that.
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thank you, cory. payment power may be taking off. the marketplace is still the core of the company. how are they keeping their digital shopping business booming? that is next. ♪
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>> welcome back to a special edition of "bloomberg west." i'm emily chang. while ebay's payments business is clearly booming, the core of the company is still in its ebay marketplace. as more retailers offer their
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own marketplace, how are they making their marketplace better? jon erlichman is back with more. >> you are right about that. the marketplace is more than half of the revenue. two thirds of the operating income. devin, the guy who runs the business -- i found myself wondering what he was buying this holiday season. >> game consoles -- lots of them for my kids. at the world's biggest store that is ebay. >> i asked that because you are obviously data-driven. what can you tell us about what the average customer is buying? are there any major differences between competitive players out there? >> the amazing thing is that it is the world's largest store. it has over half a billion items for sale. there's not a particular thing that people buy. it becomes very deals driven
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around the holidays. it is electronics and fashion oriented. particularly since thanksgiving, we have seen a lot of electronics and fashion and jewelry. >> there was a story about the amazon drone idea. john donahoe told emily chang that they are not focused on long-term fantasies. you do have core retail partners. have you received questions from them and what it all means for ebay? >> we do not focus on drones and robots. consumer convenience is critical. getting things to people in a way that they can trust, quickly and efficiently, is critical for the future of digital commerce. our response to that is ebay now. it is linking inventory with people and stores and retail with local shopping. that is a great solution. it is efficient. we will scale it to 25 markets next year. the future will see. there is a lot of capacity and there. it does point out a big difference between us and competitors.
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ebay is humanistic. we do not have the view that technology will replace people or retailers or merchants. it will transform retailers, but not replace them. >> you mentioned that you are buying game consoles. there's a story about a father who thought he was buying an xbox and it turned out to be a photo. how do you deal with those kinds of stories? >> what is critical is that we have retail standards. people have confidence that what they buy is what they expected. anytime something goes wrong, we have a rocksolid guarantee. they will call us up and they will get their money back. no questions asked. that is really important to help to turn us from a peer to peer marketplace to a retail experience. >> thank you. have fun with those gaming consoles, by the way. back to you. >> thank you, jon.
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ebay is just one of the silicon valley companies trying to get packages to you faster. if you live in select cities, the delivery service will bring things to you in just an hour. we will tag along with a courier next. ♪
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>> i am in an ebay now car. this is used by valets who are delivering things all over the place. they deliver things within one hour. they will roll these out in 25 cities in 2014. if you'll excuse me, i have a pickup to make. >> jon erlichman is looking good in that ebay now mini-cooper. to give you a closer look at what goes into executing order to delivery in one hour, he follows two of the valley drivers through the streets of new york and san francisco. take a look. >> need something and need it now? if you live in the bay area or the big apple, we could be waiting to answer your call. >> i just got an order for a usb cable. >> portable bluetooth speaker. i am going to best buy.
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>> they are shopping valets for ebay now. it is the newest addition to the online marketplace. it is an experiment in instant delivery. customers in new york on a chicago, and dallas can buy products from nearby retailers. they will deliver the goods in under one hour. >> people can shop anytime anywhere on mobile phones. immediate delivery is a logical extension. >> ebay charges five dollars for the delivery service. it is waiving the fee during the holiday season to get more shoppers. >> we know the working professionals like the service. half of our service is filled during the day. >> it is not a new trend in e- commerce. google has their own express shopping service. amazon is reducing shipping times. their ceo, jeff bezos, says that his company is testing a program where drones will deliver packages up to five pounds in just 30 minutes.
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ebay is upping the ante to expand its delivery service to 25 cities next year. >> retailers love that we can take advantage of existing stores and meet consumers expectations. when they win, we win. >> jon erlichman is there following a courier. i also got my gloves delivered in one hour. jon, come on. i did it myself. they are smart gloves. you can use your phone with them. they did not come by drone. john donahoe says that amazon drones are a long-term fantasy. >> amazon does not have drones. they did a press release and got a lot of attention. more attention than ebay is getting. ebay is clearly in a hurry. we talked about how many acquisitions they are doing. they're not waiting to build products or drones. they're doing something now. >> i believe they have bought 20 plus companies.
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>> this ties into the ebay now story. they are not giving the hard numbers yet. great, everyone wants everything right now. we are all impatient. to figure out how to work, they have to take a little bit of time. this was a delicate balance. >> they are doing a promotion that is free. that is nice. after using at once, i will definitely use it again. >> you do not like to wait. i remember when i walked into this building and there were analysts. they were asking difficult questions. when are we going to see a return? all these years later, the business is growing by leaps and bounds. on air, they said that growth will reaccelerate. >> it has become so well integrated. >> it is still a huge part. >> thank you all for joining us for this special edition.
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from san jose, california. ♪
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>> this week on "political capital", former secretary of state madeleine albright talks about nelson mandela and north korea. the november jobs report. margaret carlson and ramesh ponnuru debate obamacare's revival. we begin the program with the former secretary of state, dr. madeleine albright. madame secretary. >> good to be with you. >> you paid tribute to the noble